This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If mistake as to identity of subject-matter prevents the contract from coming into existence, while mistake as to quality or characteristic is not operative, the distinction between these two classes of mistake is often of the greatest importance.1 Iu some cases, however, the quality of a thing is the very thing for which the parties are contracting and a mistake as to such quality or characteristic may be regarded in some jurisdictions as operative.2 Thus, A sold to B, for eighty dollars, a cow which both thought was barren. If barren the cow was worth eighty dollars; if a breeder, seven hundred and fifty dollars to a thousand dollars. After the contract was made, it was discovered that the cow was with calf. A refused to perform, and B brought suit. It was held that "the mistake was not of the mere quality of th'e animal, but went to the very nature of the thing."3 It needs only the foregoing quotation to show that the court decided the case on an erroneous theory as to the character of the mistake, from which followed the wrong conclusion as to its effect on the contract.
1 For the effect of mistakes as to identity and the like see ch. IX.
2 United States. Wilson v. Ins. Co., 5 Fed. 674; Bogardus v. Grace, 78 Fed. 856.
California. Hannah v. Steinman, 150 Cal. 142, 112 Ac. 1004.
Iowa. Montgomery County T. Emigrant Co., 47 la. 91
Mississippi. Nabours v. Cocke, 24 Miss. 44.
Vermont. Ketchum v. Catlin, 21 Vt. 191.
West Virginia. Bluestone Coal Co. v. Bell, 38 W. Va. 297, 18 S. E. 493.
3 Sherwood v. Walker, 66 Mich. 568 (577), 11 Am. St. Rep. 531, 33 N. W. 919.
While this case is an extreme one, it is hard to justify it on any theory that does not impair the validity of practically all contracts. Thus where A and B both thought that there was a vein of coal on A's land which could be worked profitably, and A leased the coal and timber privileges to B, at a royalty of ten cents a ton for coal and fifty cents a thousand feet for timber, and it turned out that no coal existed on such land suitable for working, it was held that A could have rescission.4 A lease under the mistaken belief that an oil well existed on the land,5 or that there is a certain amount of timber thereon,6 or that a temporary building can be erected on land which is, in fact, within the fire limits,7 is invalid. So where a county agreed to convey all its claims to swamp lands for a certain price, not knowing that an allowance of four thousand seven" hundred and thirty acres had been made on a doubtful claim, rescission was allowed in equity.8 Where A sold property to B, both believing that it was in Whitehall, when in fact it was in Boston,9 or where A insured B's property, both believing that no insurance was in force thereon, when in fact there was a policy in force which was avoided by the second policy,10 or where A and B, husband and wife, both thinking A solvent agreed that B should deed A her separate estate and A should by will divide his property equally
4 Bluestone Coal Co. v. Bell, 38 W. Va. 297, 18 S. E. 493. The timber privilege was leased for much less than it was worth, simply to enable B to use the timber in mining for coal. A sought to enjoin B from removing the timber, which was refused; and B by cross-bill prayed for rescission, which was allowed. A similar case is Fritz-ler v. Robinson, 70 la. 500, 31 N. W. 61.
5 Mays v. Dwight, 82 Pa. St. 462. 6 Thwing v. Lumber Co., 40 Minn.
.184, 41 N. W. 815. (But mistake here is complicated with misrepresentation.) And see Brickley v. Patterson, 39 Minn. 250, 39 N. W. 490. Daniell v. Mitchell, 1 Story (U. S.) 172, has been cited in support of this proposition. . It really comes under the principle of Sec. 222, since the existence of a certain amount of timber on the land conveyed was made a term in the contract.
7 Hannah v. Steinman, 159 Cal. 142, 112 Ac. 1094.
8 Montgomery County v. Emigrant Co., 47 la. 91. The contract was to convey "all vacant swamp lands owned by the county, being 412 acres, at the price to be therefor of one dollar and twenty-five cents per acre. The said county further agrees to sell, assign and release to said company all the rest and residue of the swamp land claim and the ewamp land interest of said county in law and in equity of whatever the same may consist and to as full and as great an extent as the county may hold or be entitled to the same at and for the further sum of $3,000."
9 Ketchum v. Catlin, 21 Vt. 191.
10 Wilson v. Ins. Co., 5 Fed. 674. (la this case after loss the second policy was cancelled by A and it was held that because of the mistake the first policy" could be enforced in spite of such clause.) among B and his children, her step-children, and A was in fact insolvent, so that B would lose everything unless rescission were allowed,11 or A conveyed property under the belief shared by grantee that a forthcoming bond had been properly executed and hence, by statute, had on forfeiture become a lien on such property,12 rescission has been allowed. Some of the cases cited in support of this proposition can really be explained on other grounds, such as lack of consideration, or breach. Other cases which seem to rest on this theory are cases in which the mistake really affected the identity of the subject-matter. Thus A assigned to B his claim against the Peruvian government for collection. Subsequently the Peruvian government credited this claim on its account against B. A not knowing of such payment agreed to sell this claim to B for an amount less than had already been collected thereon. It was held that A, on learning of the facts, could recover the amount collected by B less the amount paid to him by B.13 So a mistake as to the quantity of land sold really involves the subject-matter itself.14 Those which can not be explained except on the theory of mistake are excellent examples of the danger of allowing the courts to determine after the event what contract the parties would or would not have made in advance if they had known everything which could affect their liability, and to annul contracts which the court may believe that the parties would not have made.
In other cases, matters which affect the nature of the subject-matter are treated as matters of quality or characteristic rather than as matters of identity.
If one who owns timber agrees to sell "whatever interest he may have" therein, it is said that mistake does not exist, although an attachment had been levied on such timber without the knowledge of either party.15 If A has sold to B all the coal under a certain tract of land, B can not have rescission of such sale on the ground that there is not as much coal under such land as he had hoped to obtain, if there is in fact a substantial quantity of coal thereunder.16 If A agrees to sell mining rights to B subject to certain timber rights which may delay the enjoyment of the mining rights, the fact that the mineral rights prove to be much more valuable than A had thought and worth much more than the consideration named, does not amount to such mistake as would avoid such contract.17
11 ITrippe v. Trippe, 29 Ala. 637.
12 Nabours v. Cocke, 24 Miss. 44.
13 Bogardus v. Grace. 78 Fed. 856.
15 Exchange Bank v. Williams, 120 La. 901, 45 So. 935.
I6 Light v. Grant, 73 W. Va. 56, 51 L. R. A. (N.S.) 792, 79 S. E. 1011.